RAGHURAM RAJAN COMMITTEE REPORT

ON STATE DEVELOPMENT INDEX

PRESENTED BY:

NITESH SINGH PATEL (2013178)

PAREENA NEEMA (2013191)

POULAMI SARKAR (2013201)

PRALOY KUMAR SAHA (2013205)

PRERNA BANSAL (2013209)

SECTION-D (2013-15)

HISTORY•GADGIL FORMULA :

• NAMED AFTER THEN PLANNING COMMISSION CHAIRMAN DR. D R GADGIL.

• WAS INTRODUCED DURING FOURTH AND FIFTH FIVE YEAR PLAN.

• IT HAD THE FOLLOWING FORMULA :-

SPECIAL CATEGORY STATES LIKE ASSAM, JAMMU AND KASHMIR AND NAGALAND WERE GIVEN PREFERENCE.

THE REMAINING BALANCE OF CENTRAL ASSISTANCE WAS SHOULD DONE ON FOLLOWING BASIS – Weight(%) Criteria

60 Population

10 Tax Effort

10 Per capita state income

10 Irrigation and Power projects

10 Problems of individual states

GADGIL-MUKHERJEE FORMULA :

• NAMED AFTER THEN CHAIRMAN OF PLANNING COMMISSION DR. PRANAB MUKHERJEE.

• THE NEW REVISED FORMULA IS GIVEN IN FOLLOWING TABLE –

Weight(%) Criteria

55 Population

25 Per capita income

5 Fiscal Management

15 Special problems

100 Total

THE RAGHURAM RAJAN COMMITEE

• STATE DEVELOPMENT INDEX IS A MEASURE OF REDUCING THE REGIONAL DISPARITIES, SUBSTANTIAL DIFFERENCES IN DEVELOPMENT BETWEEN DIFFERENT STATES.

• IN MAY’13 GOVERNMENT DECIDED TO CONSTITUTE AN EXPERT COMMITTEE TO CONSIDER BACKWARDNESS OF THE STATES.

• THE COMMITTEE CAME UP WITH A NEW CONCEPT CALLED AS COMPOSITE DEVELOPMENT INDEX OF STATES.

THE COMMITTEE MEMBERS

•DR. RAGHURAM G. RAJAN- CHAIRMAN

•SHRI SHAIBAL GUPTA

•DR. BHARAT RAMASWAMI

•SHRI NAJEEB JUNG

•DR. NIRAJA G. JAYAL

•SHRI TUHIN PANDEY

THE COMMITTEE’S RECOMMENDATIONS

• GENERALIZED METHOD FOR ALLOCATING CENTRAL GOVT. FUNDS TO STATES BASED ON:

1. NEEDS

2. PERFORMANCE

INDEX FOR NEED IS BASED ON

• MONTHLY PER CAPITA CONSUMPTION EXPENDITURE

• EDUCATION

• HEALTH

• HOUSEHOLD AMENITIES

• POVERTY RATE

• FEMALE LITERACY

• PERCENT OF SC-ST POPULATION

• URBANIZATION RATE

• FINANCIAL INCLUSION

• CONNECTIVITY

NEED BASED ALLOCATION

• STATES WITH HIGHER INDEX ARE THE LESS DEVELOPED STATES

• 80% WEIGHTAGE TO THE POPULATION

• 20% WEIGHTAGE TO THE AREA

DISTRIBUTION PATTERN OF CENTRAL GOVT. FUNDS

FIXED ; 8.4

NEED BASED; 68.7

PERFORMANCE BASED; 22.9

FIXED NEED BASED PERFORMANCE BASED

THE REAL SCENE

• ACCORDING TO LAW OF AVERAGE EVERY STATE MUST HAVE GOT 3.6% ALLOCATION

• BUT THIS RANGE VARIES BETWEEN 0.3% TO 16.41%

• THERE ARE 3 CATEGORIES OF STATES ACCORDING TO THIS COMMITTEE:

1. LEAST DEVELOPED: (UNDER) DEVELOPMENT INDEX OF 0.6 OR MORE

2. LESS DEVELOPED: (UNDER) DEVELOPMENT INDEX BETWEEN 0.4-0.6

3. RELATIVELY DEVELOPED: (UNDER) DEVELOPMENT INDEX OF LESS THAN 0.4

KEY ISSUES FACED WHILE DEVISING THE REPORT

1. Whether the underdevelopment index is positively correlated with left-wing extremism such that the allocation formula gives more to states affected by such insurgencies

NEED INDEX ALLOCATION SHARE

NEED INDEX ALLOCATION SHARE

•Allocation shares are determined not only by the index of underdevelopment and improvements in it, but also by their population and area. Going by this criteria, larger states do get higher allocations.

Figure , states with a higher fraction of districts affected by LWE also score higher on the underdevelopment index, and therefore are allocated a higher share of funds based on need.

2.Whether Special Categorization Method is required

Based On The following Criteria(i) Hilly and difficult terrain(ii) Low population density and/or

sizeable share of tribal population.

(iii) Strategic location along borders with neighboring countries

(iv)Economic and Infrastructural backwardness.

(v) Non-viable nature of state finances. •At present there are eleven

Special category States •Some of them has high per capita income it may not adequately measure what reaches the people.•Average Income is likely to be appropriated by resource-extracting corporations that may or may not be owned in the state. • So we can’t judge if the states are underdeveloped or not

REPLACEMENT OF SPECIAL CATEGORIZATION CONT...

MERITS OF PREVIOUS SYSTEM•States under this category have a low resource base and are not in a position to mobilize resources for their developmental.• Centre to target specific benefits. The Centre may want to offer additional forms of support to states that are particularly underdeveloped

ACCORDING TO NEW SYSTEM The 10 “least developed” states that currently score above 0.6 could, for instance, be targeted for specific additional support. Current “least developed” states would be Arunachal Pradesh, Assam, Bihar, Chattisgarh, Jharkhand, Madhya Pradesh, Meghalaya, Odisha, Rajasthan, and Uttar Pradesh

CRITICISMS• BIBEK DEBROY SAYS THE RBI GOVERNOR'S REPORT ON GROWTH OF

INDIAN STATES IS FLAWED.

• TAMIL NADU CHIEF MINISTER JAYALALITHAA WROTE TO PRIME MINISTER MANMOHAN SINGH URGING HIM TO REJECT THE REPORT.

• COMMITTEE MEMBER SHAIBAL GUPTA SUMS UP ALL THAT IS WRONG WITH THE METHODOLOGY USED TO ARRIVE AT THE CONCLUSION.

• THE REPORT SEVERELY PENALISES STATES THAT HAVE CONSISTENTLY WORKED TOWARDS THE NATIONAL GOALS OF DEVELOPMENT AND WELFARE, WHILE IT SETS ASIDE HUGE ALLOCATIONS TO STATES THAT HAVE HISTORICALLY BEEN UNDER-PERFORMERS.

PRAISE

• THE REPORT PAVES WAY FOR MORE FUNDING FROM THE CENTRE FOR ODISHA, BIHAR, AND M.P. AND U.P. WHILE GOA, KERALA, TAMIL NADU, MAHARASHTRA AND HARYANA STAND TO LOSE.

• NITISH KUMAR WELCOMES RAGHURAM RAJAN REPORT RANKING BIHAR 'LEAST ADVANCED‘ .

RECOMMENDATIONS• THE FRAMEWORK OUTLINED IN THIS REPORT BE USED TO ALLOCATE SOME OF THE DEVELOPMENT FUNDS THAT ARE ALLOCATED BY THE CENTER TO THE STATES.

• THE PROPOSED UNDERDEVELOPMENT INDEX BE UPDATED ON A QUINQUENNIAL BASIS AND PERFORMANCE BE MEASURED RELATIVE TO THE LAST UPDATE.

• THE INDEX AND THE ALLOCATION FORMULA BE RE-EXAMINED AFTER 10 YEARS AND REVISIONS PROPOSED BASED ON EXPERIENCE.

• “LEAST DEVELOPED” STATES, AS IDENTIFIED BY THE INDEX, BE ELIGIBLE FOR OTHER FORMS OF CENTRAL SUPPORT THAT THE CENTER MAY DEEM NECESSARY TO ENHANCE THE PROCESS OF DEVELOPMENT.

CONCLUSION• CHANGES IN THE WEIGHTAGE OF THE PARAMETERS DETERMINING THE STATE

DEVELOPMENT INDEX.

• DIVIDE STATES INTO THREE CATEGORIES – LEAST DEVELOPED, LESS DEVELOPED AND RELATIVELY DEVELOPED.

• EXTRA FUNDING TO STATES ACCORDING TO ABOVE CATEGORIES

• THE REPORT IS BEING APPRECIATED BY STATES UNDER LEAST DEVELOPED CATEGORY AND CRITICIZED BY STATES UNDER RELATIVELY DEVELOPED CATEGORY.

• CURRENTLY THE REPORT HAS BEEN SENT TO THE PLANNING COMMISSION FOR NECESSARY ACTIONS.

CONTRIBUTIONS

• HISTORY – PAREENA NEEMA (SLIDES 2 & 3)

• INTRODUCTION – NITESH SINGH PATEL(SLIDES 4 – 10)

• KEY ISSUES FACED WHILE DEVISING THE REPORT – POULAMI SARKAR (SLIDES 11 – 15)

• CRITICISM AND PRAISE – PRERNA BANSAL(SLIDES 16 & 17)

• RECOMMENDATIONS AND CONCLUSION – PRALOY KUMAR SAHA(SLIDES 18 & 19)